Asian markets enjoy healthy rally after China-US talks offer

HONG KONG (AFP) – Hong Kong led a rally in most Asian markets yesterday after the US reached out to China in a fresh bid to avert a trade war, providing some much-needed respite to weary investors.

News that Treasury Secretary Steven Mnuchin had invited top Chinese officials for talks comes just under a week after President Donald Trump threatened to impose tariffs on all USD500 billion worth of imports from China.

The President’s top economics adviser Larry Kudlow called the move a “positive thing” and added that “you could say that communication has picked up a notch”.

China’s Commerce Ministry yesterday welcomed the offer and said the two sides were discussing details.

Hong Kong’s Hang Seng Index jumped 2.5 per cent, having fallen for six straight days and into a bear market, which is a 20 per cent drop from its January record high.

An investor sits in front of trading boards at a private stock market gallery in Kuala Lumpur. – AP

Shanghai climbed 1.2 per cent, Seoul gained 0.1 per cent and Tokyo ended one per cent higher.

Wellington and Manila were also higher, while Jakarta ran up 0.9 per cent and Bangkok 1.6 per cent.

But Sydney fell 0.8 per cent and Singapore eased 0.2 per cent.

“Markets should welcome the news of possible resumption of high-level trade talks between China and the US,” said JP Morgan Asset Management chief market strategist for Asia-Pacific Tai Hui.

“This may reflect strong feedback from the US corporate sector against further expansion of the list of Chinese exports that would be subjected to higher tariffs.”

However, while stressing the latest round of threatened tariffs could be delayed, he said Beijing had already agreed to buy more American goods to reduce its gaping surplus with the US and open up the economy further, so it might not be able to offer much more.

“The road to a more sustained resolution is still challenging,” Tai added.

And head of Asia-Pacific trading at OANDA Stephen Innes said “the playbook remains unchanged and it would be a total surprise for many market participants if the Trump administration didn’t follow through” with the next round of tariffs.

The tariffs are clearly starting to hit US and European firms based in China.

Yesterday, the American Chamber of Commerce in China said a survey found most US companies are seeing rising costs, lower profits and tighter scrutiny, and a separate poll of 200 EU companies in the country showed 17 per cent are delaying investment or expansion plans.

That comes a day after the Federal Reserve reported increasing fears across the United States about the trade row, with some businesses planning to curtail capital spending, while a new lobby group announced plans to campaign against the levies in November’s elections.

The optimism also supported emerging-market and high-yielding currencies battered by a flight to safe havens such as the dollar and Japanese yen.

South Africa’s rand rose 1.3 per cent, the Russian ruble gained 0.8 per cent and the Australian dollar jumped one per cent. The South Korean won put on 0.6 per cent while the Indonesian rupiah gained 0.3 per cent.

Energy firms also climbed with investors keeping tabs on Hurricane Florence as it surges towards the US east coast, with the Carolinas and Georgia in its crosshairs.

Concerns about the massive destruction the storm is likely to cause have helped send oil prices higher, while a forecast-beating draw in US stockpiles added to the increase.

While both main contracts dipped slightly yesterday, Japanese energy firm Inpex piled on 3.7 per cent, while in Hong Kong PetroChina soared more than five per cent and CNOOC rallied almost four per cent.

In early European trade London and Frankfurt each dipped 0.1 per cent while Paris was flat.